BILL ANALYSIS Ó SB 7 Page 1 SENATE THIRD READING SB 7 (Wolk) As Amended September 4, 2015 Majority vote SENATE VOTE: 28-7 -------------------------------------------------------------------- |Committee |Votes|Ayes |Noes | | | | | | | | | | | | | | | | |----------------+-----+-----------------------+---------------------| |Housing |7-0 |Chau, Steinorth, | | | | |Burke, Chiu, Beth | | | | |Gaines, Lopez, Mullin | | | | | | | |----------------+-----+-----------------------+---------------------| |Water |10-4 |Levine, Dababneh, |Dahle, Beth Gaines, | | | |Dodd, Cristina Garcia, |Harper, Mathis | | | |Gomez, Lopez, Medina, | | | | |Rendon, Salas, | | | | |Williams | | | | | | | |----------------+-----+-----------------------+---------------------| |Appropriations |12-4 |Gomez, Bloom, Bonta, |Bigelow, Gallagher, | | | |Calderon, Nazarian, |Jones, Wagner | | | |Eggman, | | | | | | | | | | | | SB 7 Page 2 | | |Eduardo Garcia, | | | | |Holden, Quirk, Rendon, | | | | |Weber, Wood | | | | | | | | | | | | -------------------------------------------------------------------- SUMMARY: Requires, as of January 1, 2017, that individual water meters, also called submeters, be installed on all new multifamily residential units or mixed commercial and multifamily units and requires that landlords bill residents for the increment of water they use. Specifies rights and obligations between landlords and tenants. Specifically, this bill: 1)Creates a new article in the Water Code regarding submetering (submetering article) that requires each water purveyor that sells, leases, rents, furnishes, or delivers water service to a newly constructed multiunit residential structure or newly constructed mixed-use residential and commercial structure for which a water connection is submitted after January 1, 2017, to ensure each individual unit be metered or submetered as a pre-condition to new water service. Prohibits the water purveyor from imposing an additional capacity or connection fee or charge for a submeter that is installed by an owner or his or her agent. 2)Exempts long-term health care facilities, low-income housing, residential care facilities, housing at a place of education, and time-share properties from the requirement to submeter. 3)Defines low-income housing as a residential building financed with tax credits, tax-exempt mortgage bonds or other federal, state, or local funds, as specified, and where 90% or more of the units are occupied by lower income households, which is defined as persons and families whose income does not exceed the qualifying limits for housing under Section 8 of the SB 7 Page 3 United States Housing Act of 1937 or, under specified circumstances, an equivalent. 4)Allows the Department of Housing and Community Development (HCD) to develop requirements for the installation of water submeters in multiunit residential structures, including specifying when such installation is infeasible and thus exempt, such as potentially with high-rise multifamily buildings and to propose those requirements for adoption by the California Building Standards Commission (CBSC) in the next regularly-scheduled update of the California Building Standards Code that occurs on or after January 1, 2016. 5)Requires HCD to exempt long-term health care facilities, low-income housing, residential care facilities, housing at a place of education, and time-share properties in any building standards it develops for submetering. Defines low-income housing for the purposes of the exemption section. 6)Renders the submetering article inoperative (and thus superseded) on the date that the CBSC includes submetering requirements in the California Building Standards Code that conform to the submetering article. 7)Adds a new Chapter to the Civil Code regarding "Water Service" with findings that the purpose of this Chapter is to encourage water conservation in multifamily residential buildings while ensuring that practices for water service billing are just, reasonable, and include appropriate safeguards for both landlords and tenants. 8)Defines the following terms for the purpose of the statute: SB 7 Page 4 a) "Billing agent" means a person or entity who contracts to provide submetering services to a landlord, including billing. b) "Landlord" means an owner of residential rental property. "Landlord" does not include a tenant who rents all or a portion of a dwelling unit to subtenants. "Landlord" does not include a common interest development, as defined. c) "Property" means real property containing two or more dwelling units that is served by a single master meter. d) "Purveyor" means any local purveyor who bills the landlord for charges related to water treatment, distribution, or usage, including, but not limited to, water, sewer, stormwater, flood control, and water treatment charges. e) "Ratio utility billing system" means the allocation of water and sewer costs to tenants based on the square footage, occupancy, or other physical factors of a dwelling unit. f) "Rental agreement" includes a fixed-term lease. g) "Renting" includes leasing, whether on a periodic or fixed-term basis. h) "Submeter" means a device that measures water consumption of an individual rental unit within a multiunit residential structure or mixed-use residential and commercial structure, and that is owned and operated by the owner of the structure or the owner's agent. As used in SB 7 Page 5 this section, "multiunit residential structure" and "mixed-use residential and commercial structure" mean real property containing two or more dwelling units. i) "Water service" includes any charges, whether presented for payment on local purveyor bills, tax bills, or bills from other entities, related to water treatment, distribution, or usage, including, but not limited to, water, sewer, stormwater, flood control, and water treatment charges. j) "Water purveyor" means any person who furnishes water service to another person. 9)Provides that a submetering system that measures only a portion of a dwelling unit's water usage, including, but not limited to, a system that measures only hot water usage, is not subject to this chapter if the system was first put in service before January 1, 2017. 10)Specifies that properties that use submeters to separately bill tenants for water service must ensure that meters and submeters: a) Conform to state rules and regulations governing devices that weigh and measure; b) Are installed and operated in compliance with specifications for measuring devices; c) Only measure the exclusive water use of that dwelling; and SB 7 Page 6 d) Are accessible to tenants and can be read by the landlord without entering the dwelling. 11)Requires all plumbing fixtures within each dwelling to conform to all laws regarding water conservation. 12)Specifies water purveyors are not responsible for ensuring compliance with installation, certification, maintenance, and testing of water submeters and associated onsite plumbing. 13)Provides that, unless the water purveyor or local government is operating under an ordinance or regulation requiring individual metering, the owner is required to install and read submeters, unless the water purveyor agrees to install and read individual meters. 14)Requires the installation of submeters to be provided by contractors licensed by the California Contractors State License Board using workers who have graduated from a state-approved apprenticeship program. 15)Requires a landlord that intends to charge a tenant separately for water service to provide specified disclosures in writing, in at least 10-point type, prior to executing a rental agreement that include, but are not limited to: information regarding calculation of the tenant's bill; due dates, including any past-due fees that may be charged; and, the tenant's rights regarding meter testing, leak repair, and submeter malfunctions, among other provisions. 16)Provides that the amount of the water bill shall be calculated by multiplying the water volume as determined by the submeter for the billing period by the rate or rates for the volumetric usage that are established by the water purveyor for residential use (volumetric use charge). SB 7 Page 7 17)Specifies that the monthly bill for water service may only include four charges: a) A charge for volumetric usage, which may be calculated in any the following ways: i) The amount shall be calculated by first determining the proportion of the tenant's usage, as shown by the submeter, to the total usage as shown by the purveyor's billing. The dollar amount billed to the tenant for usage shall be in that same proportion to the dollar amount for usage shown by the purveyor's billing. ii) If the purveyor charges for volumetric usage based on a tiered rate schedule, the landlord may calculate the charge for a tenant's volumetric usage, as specified, or the landlord may instead divide each tier's volume evenly among the number of dwelling units, and the rate applicable to each block shall be applied to the consumption recorded for each dwelling unit. iii) If the purveyor charges the property rates on a per-dwelling unit basis, the tenants may be charged at those exact per unit rates. b) The tenant's portion of the fixed charges from the water purveyor divided equally, or by proportion of volumetric use charge, among all property units. c) A billing, administrative, or other fee for the landlord's and billing agent's costs, that is no more than $4.75 or 25% of the amount billed, whichever is less. Beginning January 1, 2018, allows a billing fee percentage increase but limits it to no more than the Consumer Price Index California fiscal year average for the previous year. SB 7 Page 8 d) A late charge, as specified. 18)Does not prevent the landlord or the landlord's billing agent from using one bill to cover multiple lawful charges, including rent, to the same tenant. 19)Requires meters to be read within three days of the same point in each billing cycle and payments to be due at the same point in each billing cycle. Requires that the submeter must be read upon the tenant taking possession, within five days of ending the tenancy, or as specified. 20)Allows a tenant to agree to be billed electronically but prohibits a tenant from being compelled to receive electronic bills. Requires the tenant be provided contact information for questions regarding the bill including a local or toll-free phone number and a statement on the bill that the landlord or billing agent is not the water purveyor and the name of the local water purveyor providing water service to the master meter. 21)Does not allow a landlord to pass through water charges or penalties that are imposed by a water purveyor on a landlord unless they are related to tenant's documented conduct. 22)Requires a landlord to make available, within seven days from a tenant's written request: a) Information relating to the submeters inspection, testing, and verification unless that information is unavailable, in which case the landlord shall disclose it is unavailable. b) The data used to calculate this bill, as specified. SB 7 Page 9 c) The location of the submeter. 23)Provides that if a water system in a dwelling unit does not function properly, including plumbing leaks that allow unnecessary water consumption or a malfunction submeter, the landlord should investigate and, if warranted, repair the condition. Prohibits a tenant from removing water fixtures or water conservation devices installed by the landlord. 24)Requires a landlord who is notified of leaks or other conditions causing water consumption or a submeter reading indicating constant or abnormal water usage to repair the condition within 14 days or be: a) Restricted to charging the tenant, for the period after the 14 days, $15 for the month's water use, or actual usage, whichever is less; or, b) Allowed, at the landlord's option, to charge a maximum of $0.50 per day for those days between the two meter readings, or actual usage, whichever is less, if there are meter readings for both before and after the repair; and, c) Prohibited from charging for volumetric water usage if the condition is unrectified for 6 months after the investigation. 25)Allows the landlord, consistent with current laws governing landlord entry, to access the tenant's unit for purposes of installing, reading, repairing, testing and maintaining a submeter or repairing or testing a water fixture the tenant reports is in need of repair. 26)Provides that if a monthly submeter reading is unavailable, the landlord shall advise the tenant and bill at a rate equal to 75% of the tenant's average monthly use based on the three prior months. If billing for the three prior months is unavailable, the use charge for days that data is unavailable SB 7 Page 10 shall be $0.50. If readings remain unavailable for six months, the volumetric use charge shall be zero. 27)Allows a landlord to impose a late fee of up to $7 for bills overdue by 25 days and a late fee of up to $10 in each subsequent bill if an amount remains unpaid. Requires partial payments to be credited against the bill outstanding the longest. 28)Allows a landlord, under specified circumstances, to deduct from the security deposit late bills or bills of tenants who have vacated. 29)Allows a bill that is 30 days overdue to constitute a curable material breach of the lease that gives the landlord the right to terminate the tenancy. 30)Allows, if the water bill remains unpaid for six months or the amount of the unpaid water bill equals or exceeds $250, a landlord to terminate the tenancy in accordance with state law with the service of a three-day notice to pay or quit upon the tenant. 31)Specifies that water service charges do not constitute rent and that a landlord is prohibited from shutting off water to a dwelling unit except as needed for repairs, replacements of equipment, or maintenance. 32)Provide that a final occupancy permit for a building shall not be denied by a local building official if water submeters or meters have not been installed for each residential unit as required by this chapter if the building owner can demonstrate either of the following: SB 7 Page 11 a) Water submeters have been ordered and were delayed by the manufacturer; or b) Water submeters for the building were submitted to a county sealer and are awaiting approval for use. c) After issuance of the occupancy permit, the owner shall ensure that the submeters are installed in the building within 120 days of approval by the county sealer. 33)Does not preclude or preempt ordinances or regulations adopted prior to January 1, 2013, that govern the approval, installation, maintenance, reading, billing, or testing of submeters and onsite plumbing. 34)Prohibits the waiver of any of the provisions established under this chapter and makes any purported waiver void. 35)Provides that nothing in this chapter shall be construed to state a legislative policy favoring or disfavoring the use of a ratio utility billing system. FISCAL EFFECT: According to the Assembly Appropriations Committee: 1) HCD administrative costs of $244,000 over two years ($127,000 in the first year, $114,000 in the second year) for one limited term Personnel Year (PY) of staff to develop the proposed building standards (Building Standards Administration Special Revolving Fund). SB 7 Page 12 2)Minor and absorbable costs for the CBSC to adopt the proposed building standard in the next or subsequent triennial code adoption cycle. 3)Minimal fiscal impact to the Department of Food and Agriculture. This bill would increase the amount of water submeters installed in multiunit structures. Each water submeter is charged an annual device administrative fee in the amount of $0.10 per device. These funds are deposited into the Department of Food and Agriculture Fund. The Department estimates the increase in revenue generated by the additional water submeters will be less than $5,000 annually. COMMENTS: Background: Existing law, the California Building Standards Law, authorizes the CBSC to approve and adopt building standards through a triennial rulemaking process to revise and update the California Building Standards Code. There are approximately twenty state agencies that develop building standards for submittal to the CBSC for review, approval, and adoption. HCD is responsible for proposing building standards for residential buildings including, hotels, motels, lodging houses, apartment houses, dwellings, buildings and structures. Building standards take effect 180 days after they are published, unless a different date is specified. The most recent update to the Building Standards Code has been in effect since January 1, 2014. The 2015 triennial code adoption cycle for the development of the 2016 California Building Standards Code is currently underway. The subsequent triennial cycle will commence in 2018. Existing law requires all new water service connections to be metered, and requires water purveyors to charge water users based on the actual volume of deliveries as measured by those SB 7 Page 13 meters. In addition, all existing unmetered water connections must be retrofitted with a meter by 2025. Generally, individual units in multiunit residential buildings are not metered or submetered, and residents typically pay for water and sewage based on the average water use of all units, rather than actual usage attributable to individual units. This bill would require installation of water submeters in all newly constructed multifamily residential units or mixed commercial and multifamily units, for which an application for water connect is received, after January 1, 2017. This bill is prospective and does not require an owner of an existing multifamily dwelling to install submeters, retrofit existing submeters, or use existing submeters that are currently unused. This bill requires the installation of submeters to be provided by contractors licensed by the California Contractors State License Board using workers who have graduated from a state-approved apprenticeship program. Purpose of this bill: According to the author, "California's water supply is under intense pressure from climate change, increasing population and development. The financial demands from communities around the state for additional water and wastewater infrastructure currently exceed the available state and federal budgetary resources. Thus, it is essential that all California communities use existing water supplies as efficiently as possible." The author adds that "water metering and volumetric pricing are paramount to giving Californians an accurate price signal about their water use." The author states that "California's population is 38 million people and growing. Currently, 46% live in multi-family housing. Of the State's 15.6 million apartment residents, fewer than 20% SB 7 Page 14 (3.1 million) are billed for their water use. In other words, for 80% of California's apartment renters, or 12.5 million Californians, there is no correlation between water usage and cost." Arguments in support: Supporters, primarily environmental groups and advocates for low income residents, state that this bill will help apartment dwellers track their water use, and water use typically declines when water rates are charged on a volumetric, metered rate. Assessing water charges based on actual use will be an incentive to reduce wasteful practices. Supporters contend that people living in multiunit housing will be a critical part of the picture as California suppliers strive to reduce water use by 20% by 2020, and this bill will encourage tenants to be more judicious in their use of water. Arguments in opposition: Amendments adopted on July 16,2015, restricting the installation of submeters to workers who have graduated from a state approved apprenticeship program elicited new opposition to the bill from members of the bill's working group who were previously in support or neutral. Opponents question the need for this amendment, and contend that "the installation of submeters is a highly specialized activity, requiring service agents to be trained to follow very specific regulations issued by the California Department of Food and Agriculture's Division of Measurement Standards. This system has been in place for years and there are no known concerns or workmanship performance issues that need to addressed by this legislation." Opponents also argue that the requirement to use workers who have graduated from a state-approved apprenticeship program may be appropriate when public funding is involved, but should not apply to private construction on private property. Related legislation: SB 7 Page 15 SB 750 (Wolk) of 2014: This bill would have mandated that water purveyors adopt policies requiring that newly constructed multiunit residential structures or mixed use residential and commercial structures that apply for water connections after January 1, 2015, have, as a condition of new water service, submeters that measure the water supplied to each individual dwelling unit. Included a cap on the administrative fee that landlords can charge a tenant for billing for water. This bill failed passage in the Assembly Water, Parks, and Wildlife Committee. On May 18, 2015, the California Department of Finance posted language very similar to SB 750 as trailer bill proposal number 826 to the Natural Resources and Capital Outlay area of the Governor's 2015-16 Budget. The Governor's office grouped the submetering requirement with other proposals addressing drought but ultimately left the language out of the budget. AB 19 (Fong) of 2012: This bill would have mandated that water purveyors adopt policies requiring that multiunit residential structures or mixed use residential and commercial structures that apply for water connections after January 1, 2014, have, as a condition of new water service, submeters that measure the water supplied to each individual dwelling unit. This bill failed passage in the Assembly Housing and Community Development Committee. AB 1975 (Fong) of 2010: This bill would have required HCD to adopt building standards requiring installation of individual water meters and submeters in newly constructed multiunit residential buildings. This bill died on the suspense file in the Senate Appropriations Committee. SB 7 Page 16 AB 1173 (Keene) of 2008: This bill would have required submeters in multiunit residential structures built after January 1, 2010. This bill died on the suspense file in the Assembly Committee on Appropriations. Analysis Prepared by: Rebecca Rabovsky / H. & C.D. / (916) 319-2085 FN: 0002189